When the chips are down, no wonder investment suffers

The Gartner market research firm now expects worldwide semiconductor industry revenues to expand just one percent in 2009, dramatically below its prior growth estimate of 8 percent.

Gartner research vice president Bryan Lewis issued the latest forecast Monday, estimating that worldwide chip revenues will total $279.4 billion in 2008. That would represent a meager two percent increase over 2007 as chip buyers — notably PC and cell phone makers — produce fewer units and consume fewer semiconductors as a result.

“Mounting evidence suggests that the semiconductor industry will see negative growth starting in the fourth quarter of 2008, and that this will continue through most of 2009, Lewis said in a statement.

A separate report from the Global Semiconductor Alliance, a trade association of chip design and manufacturing firms, suggests that the gloomy sales outlook is already reflected in a diminished investor interest in the sector.

The association’s third quarter funding report notes that, during the last nine months, there have been no public offerings of venture-capital backed chip-making or design firms. Mergers and acquisitions have also continued to decline over the last three quarters.

Unsurprisingly, given the above, venture capital investment in chip or solar cell makers fell to $231.6 million in the third quarter, a decline of 57 percent over the same period the prior year, the report said.